Skipping IOI to LOI

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by a searcher from The University of Texas at Austin - Red McCombs School of Business
in New York, NY, USA

1yr ago

Skipping IOI to LOI

Does anyone have any advice or experience trying to skip a broker enforced IOI process? We have high conviction on a deal and enough information leveraging a CIM, sell-side QoE, and several industry calls to submit a thorough LOI, but the broker continues to push for an IOI. I understand they want optionality and to shop the terms, but just curious whether anyone with experience in best practices on "pre-empting" the deal. Do we just submit an executed LOI with a deadline and see what happens?

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reply by an intermediary 1yr ago
from The University of Chicago in Chicago, IL, USA

As an M&A Intermediary, once I was representing a buyer. He/We liked the business. We sent IOI+ i.e. we sent LOI- (LOI minus few points). We specifically added certain details in the LOI- that addressed seller's concerns with the intention to force the seller to ask his broker to got to all other buyers who submitted the IOIs for clarity on our points. Seller chose us b/c we had done the homework and were transparent. Price is one of the variables but not the only one. We labeled it as IOI to satisfy the broker even though it was LOI-.
The particular deal is a case study used in many ETA classes at top B=schools.

reply by an intermediary 1yr ago
from George Mason University in Springfield, MA, USA

If you're tempted to jump the process, I have some simple advice - don't do it. It does nothing to change my approach It's a red flag about you as a buyer that signals to me that you are going to be difficult to deal with as we get into due diligence, APA, etc. Professional buyers recognize that the broker/seller own the process up to the LOI and the buyer controls the process from LOI to close.